ARABIAN CENTRES ADOPTS FAIR VALUE MODEL, INCREASES NET ASSETS BY SAR 10.5 BILLION

Arabian Centres Company “ACC”, the largest owner, developer and operator of contemporary lifestyle centres in Saudi Arabia, announced that its Board of Directors has approved on 29 June 2022 the adoption of the fair value model “FMV” to measure its real-estate and investment properties. 

The expected financial impact of which will increase the value of its net assets by SAR 10.5 billion, effective starting from the third quarter of the fiscal year 2023 (which ends on 31 December 2022). The net assets will increase from approximately SAR 16 billion (as recorded at cost model) to approximately SAR 26 billion (as recorded at market value).

The decision came following the Capital Markets Authority’s announcement earlier this year, which permitted listed companies to adopt “FMV” for the financial periods starting 2022 onwards. FMV is the most used practice by the biggest real estate companies globally, and it is in accordance with the IAS 40 accounting standards. 

By adopting FVM, ACC’s investment properties will be presented at their fair value in the financial statements which will reflect the traded market value of these assets in accordance with the Royal Institution of Chartered Surveyors (“RICS”) that comply with the international valuation standards.

In addition, the implementation of this accounting standard will boost ACC’s financial position, including improving leverage ratios, triggering an increase in shareholder equity and retained earnings balance by approximately SAR 10 billion. This in turn will increase the book value per share from approximately SAR 12 to around SAR 34, providing ACC with an additional ability to maximize shareholders returns, and a higher flexibility in coping with the sector’s future developments and mitigating its associated risks.

Walead AlRebdi, Chief Financial Officer of Arabian Centres, said: “By adopting this international best practice method into our accounting processes, we are ensuring the very highest levels of accuracy and transparency when valuing our growing number of assets. Given the complexity of the assets we manage, fair value provides a robust and proven method that we already see the benefit of having estimated an increase in real asset value by more than SAR10 billion.

“We are continually working to deliver added value for our shareholders, and this will increase our shareholder equity and retained earnings balance by approximately SAR 10 billion, which in turn will increase the book value per share from approximately SAR 12 to around SAR 34.” he added. 

Finally, adopting the fair value model will generally enhance ACC’s ability to expand in its operations in a faster and more efficient way and embrace new investment opportunities.